Global policymakers debate contingent-convertible bonds

11/17/2009 | Wall Street Journal, The

Bank of England Deputy Governor Paul Tucker voiced support for contingent-capital bonds, known as CoCos, to play a role in recapitalizing banks. Federal Reserve Chairman Ben Bernanke also endorsed the type of hybrid bonds, which convert into equity when the issuer reaches a predetermined level of stress. Critics warned that some bond investors might avoid CoCos because they are not allowed to own equity. Tucker suggested that the bonds could be a beneficial part of a contingency plan.

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